Brian Stoffel, a regular Motley Fool contributor, wrote up an excellent Twitter thread on how to value early-stage high-growth companies we tend to invest in. He used $TMDX as his example. He cautions that this is a highly inexact science, but you can still use his method to build a quick and dirty ballpark model for other companies you’re interested in.
The basics are to figure out the total serviceable/addressable market, the percent market share to capture, potential profit margin, and a reasonable potential P/E multiple down the road. Use this to ballpark the market cap in 5 years, then figure out the CAGR from today. These are metrics we tend to discuss regularly from earnings calls around here, so I figure it’s helpful to put those numbers in a model especially as we have shifted to paying closer attention to valuation on the board.
I may try to apply this model to a few other darlings of our board here to see the results.
I’m not quite sure if this is OT or not, so please be thoughtful with your replies.
https://twitter.com/brian_stoffel_/status/1726655019653500966?s=46&t=SrkO8iws5rKwZgdn3NkiQw. (note you need to be logged in to view the entire thread)